Foresight 4 VCT PLC : Annual Financial Report
FORESIGHT 4 VCT PLC
Financial Highlights
Ordinary Share Fund
Net asset value per Ordinary Share as at 31 March 2012 decreased by 9.0% after allowing for the 5.0p dividend paid in February 2012, to 96.9p from 112.0p as at 31 March 2011.
An interim dividend of 5.0p per Ordinary Share was paid on 24 February 2012.
The Company made thirteen follow-on investments totalling £5,341,660 and one new investment totalling £312,503.
The Ordinary Share Fund realised £4,384,235 from the recapitalisation of two investee companies and loan repayments from two other investee companies.
C Share Fund
Net asset value per C Share as at 31 March 2012 decreased by 5.6% to 94.4p.
Since the date of the merger on 6 February 2012 the C Share Fund realised £205,163 from the sale of one quoted investment.
Since the date of the merger on 6 February 2012 the Company made one follow-on investment totalling £1,600,000, and three new investments totalling £1,987,653.
Chairman's Statement
Performance and Dividends
The period under review was one of considerable market volatility and extreme concern about the state of government finances in many parts of Europe. In the UK, economic activity was patchy and bank lending to SMEs was severely constrained.
These factors affected portfolio companies in a variety of ways. Some companies that needed to maintain or increase their borrowing to pursue development projects or to expand their activities had difficulty in doing so; others, with more established businesses, were able to find growth opportunities, particularly via exports.
Against this background, the net asset value of the Ordinary Share portfolio as at 31 March 2012 declined 9.0% to 96.9p after allowing for the dividend paid in February 2012 (31 March 2011: 112.0p) and the NAV per C share fell by 5.6% to 94.4p (6 February 2012: 100.0p). Although never a satisfactory measure of performance, these results compare favourably to the performance of the FTSE AIM All-Share which represents a basket of smaller companies, which fell by 11.8% over the same period but the results compare less favourably with the FTSE 100 index, which represents a basket of larger companies and fell by some 2.4% over the same period.
The Ordinary Share portfolio benefited from the strong performances of five investments: Autologic Diagnostics; Datapath, Infrared Integrated Systems; Ixaris and TFC Europe, all of which saw increases in valuation.
A total of £3.38 million was realised from the partial sale of the investment in Autologic Diagnostics and £0.7 million received as a capital distribution from Datapath.
Other investments, however, fell behind plan and provisions were made against the valuations of Crumb Rubber, i-plas Group, O-Gen Acme Trek and Silvigen, all of which operate in the environmental sector. As a consequence of continuing technical issues at Vertal which led to lower throughput of food waste than planned and much higher disposal costs, significant trading losses continued to be incurred. Following a thorough strategic review, Foresight Group declined to provide any further funding, resulting in the company going into administration on 21 June 2012. No investment is expected to be recovered from the company.
Certain companies are making progress but at the same time have encountered delays in project implementation and in building their businesses in what has proved to be difficult trading conditions. AIM-listed Zoo Digital suffered a sharp decline in its share price following disappointing results, and there was also a fall in the valuation of Trilogy resulting from a fall in sector multiples in the defence and communications sectors. The combination of these valuation decreases outweighed other portfolio gains. Overall, however, despite these setbacks, Foresight Group remains positive about the prospects for this portfolio.
A comparison of the relative performances of and returns achieved by the Fund's environmental infrastructure investments and private equity investments during the year under review highlights the better potential returns from focusing more on the latter in future, a policy which the Investment Manager is now actively pursuing and one which is complementary to the increase in deal-flow being experienced by Foresight Group. Over the last two or so years, the weak recessionary economic conditions and lack of availability of bank and equity finance have adversely affected the performances of and hindered the planned expansion of the environmental investments. As these poor macroeconomic conditions are expected to continue for some time, the Board and Investment Manager have agreed that, within the existing investment policy, greater emphasis should now be placed on making private equity investments and less emphasis on environmental infrastructure investments.
As reported in my statement in the Interim Report in November, an interim dividend of 5.0p per Ordinary Share for the year ended 31 March 2012 was paid to the Ordinary Shareholders on 24 February 2012. The Company's objective is to provide a steady flow of tax-free dividends, generated from income or from capital profits realised on the sale of investments, but to some extent, this will be conditional on economic prospects.
Share issues and Buy-backs
The Company launched a linked offer for new Ordinary Shares alongside Foresight 3 VCT plc on 7 January 2011. During the period from 1 April 2011 until the offer closed on 30 June 2011 a total of 1,110,690 Ordinary Shares were allotted at prices ranging from 115.0p to 119.0p per share representing £1.3 million of funds raised at 31 March 2012.
It continues to be the Board's policy to consider repurchasing shares when they become available in order to provide a degree of liquidity for the sellers of the Company's shares. During the period, the Company repurchased 722,708 Ordinary Shares for cancellation at a cost of £711,000.
The open offer that accompanied the enhanced buyback, referred to in more detail below, resulted in a further 522,726 Ordinary Shares being issued at 105.2p per share on 5 April 2012 and 149,983 C Shares being issued at 100.3p per share on the same date.
Enhanced Buyback
I am pleased to report that the take up by shareholders of the enhanced buyback offer to shareholders was significant, with shareholders representing 5,422,774 Ordinary Shares and 4,847,443 C Shares taking up the offer during April 2012. The Board will consider offering further enhanced buybacks to shareholders in the future providing that legislation continues to allow the practice and it remains popular with the Company's shareholders.
Mergers of Foresight 5, Acuity 3 and Foresight Clearwater with the Company
On 7 October 2011, the Boards of the Company, Foresight 5 VCT, Acuity VCT 3 and Foresight Clearwater VCT announced agreements in principle to acquire the assets and liabilities of Foresight 5, Acuity 3 and Foresight Clearwater with the Company to form an enlarged Foresight 4 VCT. All of the Companies are managed by, and will continue to be managed by, Foresight Group CI Limited ("Foresight"). On 6 February 2012, the mergers were formally completed through schemes of reconstruction under Section 110 of the Insolvency Act 1986 on a relative net asset value basis, with all of the three Funds' assets and liabilities being transferred to the Company in return for the issue of new shares of 1p each and the benefits being shared by all sets of shareholders.
Foresight 5 and Acuity 3 (which had substantially common portfolios) were merged into a new separate C Shares fund within the Company with an opening NAV of £1 per share. The C Shares fund will be managed separately to the existing Ordinary Shares fund for approximately three years, at which point the C Shares fund are anticipated to be merged with the Ordinary Shares fund on a relative net asset value basis using the audited net asset values of each fund as at 31 March 2015. Foresight Clearwater, whose assets materially comprised cash or near cash, was merged directly into the Ordinary Shares fund on a relative net asset value basis. A total of 1,503,382 new Ordinary Shares were issued to Foresight Clearwater shareholders in connection with its scheme at a deemed issue price of 105.677178 pence per share, while 10,814,271 and 7,878,827 new C Shares respectively were issued to Foresight 5 and Acuity 3 shareholders in connection with their schemes at a deemed issue price of 100.00 pence per share.
Termination fees for Foresight 5 and Legal review
To terminate the appointment of Acuity as the Investment Manager and administrator to Foresight 5, the then Board of Foresight 5 agreed in February 2011 to make phased payments totalling £1,187,855 to Acuity, together with six other quarterly payments of £25,000 each. These quarterly payments were subsequently agreed to be deferred by six months (without any adjustment to the overall quantum), most of these fees then being payable in 2012. Full provision was made for these future termination payments, of which £419,000 remains to be paid at 31 March 2012.
At the request of certain shareholders, the Board again took advice from another firm of solicitors about whether or not there were any grounds for Foresight 5 to take legal action against the previous Investment Manager. As the advice received from this new firm of solicitors confirmed the previous advice received, the Board believes again that it would not be in the best interests of the Company to commence any such proceedings.
Board
Following the merger of the four VCTs noted above, the Board of Foresight 4 VCT plc appointed Raymond Abbott as a director of the Company. Raymond was formerly a Director of Enterprise VCT plc (which was merged into Foresight 3 VCT plc in 2008) and was until recently Managing Director of Alliance Trust Equity Partners.
Valuation Policy
Investments held by the Company have been valued in accordance with the International Private Equity and Venture Capital (IPEVC) valuation guidelines (August 2010) developed by the British Venture Capital Association and other organisations. Through these guidelines, investments are valued as defined at 'fair value'. Ordinarily, unquoted investments will be valued at cost for a limited period following the date of acquisition, being the most suitable approximation of fair value unless there is an impairment or significant accretion in value during the period. Quoted investments and investments traded on AIM and PLUS (formerly OFEX) are valued at the bid price as at 31 March 2012. The portfolio valuations are prepared by Foresight Group, reviewed and approved by the Board quarterly and subject to review by the auditors annually.
Investment Manager Novation
On 19 December 2011, the board approved the novation of the investment management contract from Foresight Group LLP to Foresight Group CI Limited, another Foresight Group company. The novation does not affect the services provided to the company or the terms, conditions or costs of those services.
Performance-Related Incentive
As a result of the 5.0p dividend payment per share paid on 24 February 2012 and the total return remaining in excess of 100p per share, Foresight Group was entitled to receive a performance fee of 15% of the dividend paid out to shareholders, equivalent to £285,000. In accordance with the carried interest agreement, the performance related incentive payment was made in cash.
Annual General Meeting
The Company's Annual General Meeting will take place on 27 September 2012. I look forward to welcoming you to the Meeting, which will be held in London, details of which can be found on page 58 of the annual report and accounts.
Outlook
Although there have been few realisations in recent years, the Investment Manager reports that potential acquirers have returned to the market and is hopeful that some realisations will be achieved in the coming months.
We remain cautious about the economic outlook and the Investment Manager is being extremely selective in its approach to proposals received.
Over the medium term we are still optimistic that further realisations can be achieved and so increase net asset value and facilitate shareholder distributions.
Philip Stephens
Chairman
31 July 2012
Investment Manager's Report
Following completion of the mergers in February 2012 referred to in the Chairman's Statement, the Company now comprises two separate funds, each with their own portfolios and separate share classes, the Ordinary Shares fund and the C Shares fund. Each fund is accordingly reported on separately below.
During the year under review, notwithstanding the generally weak UK macroeconomic environment and the recent dip into a mild recession, the performances of most companies in the portfolio held up relatively well, with those serving export markets trading appreciably better than those serving largely domestic markets. Economic fundamentals remain challenging with continuing uncertainties and volatility. We believe these mixed trading conditions will continue to prevail during 2012 and beyond, putting a premium on companies with robust business models and good management teams while necessitating careful cost control by others. Against this background, we are only looking at new opportunities which are considered sufficiently robust and attractive, particularly in valuation terms.
The performance of the Ordinary Shares Fund portfolio during the period has been affected by a number of negative factors, and some positive factors resulting overall in a 9.0% fall in net asset value after allowing for the 5.0p per share dividend paid in February 2012 and a fall of 5.6% in the net asset value C Share portfolio.
As mentioned in the Chairman's Statement £3.38 million was realised from the partial sale of the investment in Autologic Diagnostics and £713,000 received as a capital distribution from Datapath.
With regard to the environmental investments, which have been affected by the current economic headwinds, the need is now to build market traction and increase sales. Reflecting slower than expected growth in sales at i-plas and Crumb Rubber, further provisions have been made against these investments totalling £1 million. Despite achieving periods of extended electricity production at O-Gen Acme Trek's Stoke facility, the plant has been put into hibernation as explained below pending further validation of the technology and a provision of £2.1 million has been made against the previous carrying value of this investment. As a consequence of continuing technical issues at Vertal, which led to lower throughput of food waste than planned and much higher disposal costs, significant trading losses continued to be incurred. After a thorough strategic review, Foresight Group declined to provide any further funding, resulting in the company going into administration on 21 June 2012. No investment is expected to be recovered from the company.
Although Closed Loop Recycling is trading well and plans to increase capacity are well advanced, it has been necessary to make a provision of £0.4 million (10%) against the original cost of the investment to reflect the proposed introduction of an executive share option scheme as explained below.
Ordinary Shares Fund Portfolio Review
Over recent years, the number of follow-on investments made by the Ordinary Shares fund has continued at a high level as a result of tougher trading and credit conditions, resulting in a consequent need for additional working capital as well as funding for growth.
During the year to 31 March 2012, the Ordinary Shares fund made follow-on investments totalling £5,341,660 in thirteen portfolio companies: O-Gen Acme Trek (£1,365,179), Vertal (£1,300,133), Closed Loop Recycling (£891,303), Abacus Wood (formerly Land Energy) (£371,074), Crumb Rubber (£362,500), AtFutsal Group (£341,977), i-plas Group (£230,000), Silvigen (£202,090), Probability (£148,026), Autologic Diagnostics Group (£84,805), Zoo Digital (£18,601), Amberfin (£17,874) and Snell Corporation (£8,098).
The performance highlights during the period were as follows:
Abacus Wood (formerly Land Energy) made good progress during 2011, incurring small EBITDA losses at the Bridgend plant level. Demand continues to exceed supply for the plant's wood pellets and a further £371,074 was invested to finance capital expenditure to increase production and fund working capital. During the year, a disagreement arose concerning strategy with the management team who had ambitious plans to invest over £120 million raised from a hedge fund in building at least two large additional wood pellet/CHP plants and a pipeline of ESCo facilities supplying energy to farms, schools and hospitals under long term contracts. This would have resulted in unacceptable dilution and loss of influence for the Foresight funds and so led to a demerger of the business on 1 January 2012, with Foresight funds owning 99% of the Bridgend plant and being entitled to receive £2 million of deferred consideration, expected to be received over approximately four years from profits generated by the management team's Newco. The name of the company was changed to Abacus Wood with no restrictions on its activities. A new, highly experienced CEO has joined recently. The strategy for developing Abacus Wood comprises three elements; namely increase capacity at Bridgend, develop Energy Service Companies and complete the proposed merger with Silvigen. With sufficient space for expansion at Bridgend, plans have been developed to double capacity. The long standing plan to merge Abacus Wood with Goole based Silvigen, which also operates in similar markets and of which the Foresight funds own 91%, is expected to be effected shortly. This would provide the enlarged group with a strong geographical footprint in the UK with access to a substantial volume of sales and waste wood feedstock suppliers.
Amberfin undertook a £3 million institutional equity and loan round in November 2010, the Company advanced further loans totalling £17,874 during the year to 31 March 2012 to finance its continuing strong growth. Basingstoke based Amberfin is an internet content repurposing business (converting video for transmission over the internet), and has invested heavily in opening offices overseas and has now built a diverse global customer base.
AtFutsal Group provides facilities for futsal, a fast growing type of indoor football with 30 million participants Worldwide and the only type of indoor football recognised by the Football Association. Alongside the Swindon and Cardiff facilities, a third, much larger, flagship super arena has been opened in Birmingham, the expansion being funded with £341,977 from the Ordinary Shares fund. Sales have built up steadily in this new arena, which hosted a number of Football Association events over the summer and is now operating near break even. Good progress is being made in developing the increasingly important educational activities with several hundred students now taking sports related courses within AtFutsal's arenas and a number of partnerships entered into with educational establishments, football clubs and training organisations. Plans are progressing well to open a further super arena in Northern England to create national coverage. Sales growth, however, is behind original expectations with UK consumer spending under pressure, and progress towards profitability has been impacted as a result. The benefits of economies of scale from extended national coverage is anticipated to enhance the growth of the educational activities.
Autologic Diagnostics Group develops and sells sophisticated automotive diagnostic software and hardware to independent mechanics and garages to allow them to service and repair vehicles. In the year ended 31 December 2011, an operating profit of £5.2 million was achieved on sales of £12.2 million. The company continued its strong growth in 2011 and is continuing to grow sales and profits in its current financial year, particularly in Europe and the USA. On 1 July 2011, a recapitalisation was completed which yielded net proceeds of £501,861 for the Ordinary Shares fund against cost of £106,667, while maintaining an undiluted equity position. As part of the recapitalisation, £84,805 of loan interest was capitalised. As mentioned above, part of the investment in Autologic was sold in January 2012 in a £48 million secondary management buy-out funded by ISIS Private Equity. The sale generated cash proceeds of £2.79 million, against original cost of £1 million and Foresight 4 has retained an investment of £1.98 million in a combination of equity and loan stock in the new company formed to effect the buy-out.
Despite early setbacks, Closed Loop Recycling is now making solid operational, commercial and revenue progress with production rates at record levels alongside significantly improved plant reliability. Further investments totalling £891,303 were made from the Ordinary Shares fund in the period to provide additional working capital and finance an upgrade to the conveyor system. Product quality remains high and demand exceeds supply for all the recycled material produced. The company continues to be affected by raw material quality which restricts throughput and yield, but is making some progress in addressing this problem. A significant investment is planned at the site in Dagenham to increase capacity to sort greater volumes of mixed plastic waste. In addition, a further investment is planned to increase production capacity to meet the demand for the cleaned and sorted output, which should be possible without adding significantly to fixed overhead cost. Notwithstanding the above solid trading and exciting expansion plans, a provision of £402,505 (10%) has been made against the original cost of the investment to reflect the proposed introduction of an executive share option scheme. Principally because of the weight of prior ranking capital provided by the Foresight funds, the recently enlarged management team currently has no realistic equity incentive, a situation which is not considered to be in the best, longer term interests of all shareholders. To address this, a capital reorganisation is being effected to facilitate the introduction of such an incentive scheme, which is in line with normal market practice but necessitates making such a provision. Following completion of the expansion plans, the value of the company should be significantly enhanced, enabling this provision to be reversed.
Crumb Rubber, which manufactures fine rubber powders from waste tyres, is making slow commercial progress and so a full provision of £362,500 has been made against the cost of this investment.
Datapath Group is a world leading innovator in the field of computer graphics and video wall display technology. In the year ended 31 March 2011, an operating profit of £3.1 million was achieved on sales of £10.3 million. The company continued its strong growth in the year to 31 March 2012 with record sales being achieved in January 2012. In that month, a recapitalisation was effected, generating cash proceeds of £713,423 with no resultant equity dilution to the fund.
Evance (formerly Iskra Wind Turbines), which manufactures 5kW tree sized wind turbines, has enjoyed strong sales growth driven primarily by the introduction of the UK Feed in Tariff regime. For the year to 31 March 2012, the company achieved its first operating profit on sales of £7.25 million, over three times the level of sales in the previous year. The tariff is, however, proposed to be reduced from 1 October 2012 which may affect sales thereafter.
Global Immersion, which designs, builds and maintains visualisation systems for immersive theatres and planetariums Worldwide, won several major orders in 2010 which led to a record order book and an operating profit of £0.5 million being achieved on sales of £8.0 million in the year to 30 June 2011. These included immersive theatres and related services for projects in Asia, Africa, North America and Europe. The company also installed its first two Zorro projection theatres. Zorro is a market leading technology which enables the projection of unmatched levels of picture quality. Reflecting prevailing economic conditions, orders slowed appreciably in the current year, resulting in substantial trading losses being incurred but sales efforts have been increased and the sales pipeline is now improving, with a number of orders in prospect.
Infrared Integrated Systems continued its strong, cash generative growth in the year to 31 December 2011, driven principally by demand for its retail queue monitoring systems from supermarkets and other major retailers in the UK and USA. In June 2012, the company was acquired by a major US corporation, generating up to £900,000 for Foresight 4, of which £620,000 was paid on completion and the balance to be paid over two years subject to future performance. This compares to an original cost of £250,005.
i-plas, which manufactures a range of building products from waste plastics to replace concrete/timber products, increased its production capacity by investing in additional plastic moulding equipment in early 2011. Reflecting the present poor trading conditions in the UK construction markets, sales growth was slower than forecast (but still 50% higher than last year) resulting in reduced trading losses. During the year, £230,000 was advanced by way of loan by the Ordinary Shares fund as part of a £700,000 funding round provided by the Foresight VCTs to finance working capital requirements. Costs were cut, price rises instituted and management reorganised with the result that positive EBITDA is expected to be achieved shortly. Reflecting the slower than expected growth in sales, a further provision has been made against this investment totalling £773,059.
Ixaris, which develops and operates Entropay, a prepaid payment service using the VISA network, has also continued to develop Opn, its platform that enables enterprises to develop custom applications for payments. This platform is being used by companies in the affiliate marketing and travel sectors. In the year to 31 December 2011, an operating loss of some £0.2 million was achieved on sales of £9.1 million with further growth expected in the year to 31 December 2012.
O-Gen UK's partnership with MITIE, the major UK FTSE 250 outsourcing group, to build a series of up to five biomass-energy facilities in South West England may be extended further. These facilities are fully funded by this partner, with O-Gen UK benefitting from an equity stake and an operation and maintenance contract as a result of the technology and know-how O-Gen brings to the agreement. The first of these facilities, for 5MW, is under construction in Plymouth and is due to commence operation during Q3 2012. O-Gen will benefit further financially through sourcing fuel supplies for the facilities. The similar facility in Derby with partner Withion Power has now been successfully constructed and has recently started to generate electricity as part of the commissioning phase, further validating the technology.
Further investments were made in O-Gen Acme Trek totalling £1,365,179 to fund additional working capital and to purchase all the outstanding bank debt at a substantial discount. In December 2011, in the light of the capital expenditure required to bring the plant into full time production and resolve shortfalls in the quality of the original engineering, a detailed strategic review was carried out. It was decided to make all staff redundant and hibernate the plant until the above mentioned second generation Plymouth and Derby plants fully validate the technology and then find a partner to retro fit the facility based on experience gained from these plants. As part of this review and hibernation, the Company, Foresight 2 VCT and Foresight 3 VCT acquired the outstanding £6.3 million of bank debt for £1.9 million, of which the Company provided £923,731 and a provision of £2.1 million has been made against the previous carrying value of this investment.
Following the approach from William Hill and subsequent termination of discussions in November 2011, the Company acquired further shares in AiM listed Probability for £148,026 from Foresight 2 VCT plc at market price.
Silvigen received further funding of £202,090 to finance additional capital expenditure to increase production at its waste wood processing facility and provide additional working capital. After a series of successful trials over the last six or so months with a number of chicken farms in Lincolnshire, the first deliveries of the shredded waste wood animal bedding product have been made recently and further trials continue. Sales growth is still much slower than expected and trading losses continue to be incurred, it was deemed prudent to make a further provision of £448,961 against the cost of investment.
Despite much effort by all involved during 2010 and 2011, the attempted turnaround of SkillsMarket ultimately failed. Notwithstanding signs of increasing sales of Recruiter Account in late 2010, sales slowed appreciably during early 2011 and fell well behind budget. As substantial further investment was required, the company's Board accelerated a sales process but no offers were ultimately received and in consequence administrators were appointed in May 2011.
TFC Europe, a leading distributor of technical fasteners in the UK and Germany, reported an operating profit of £1.3 million on sales of £13.5 million for the year ended 31 March 2011. The company enjoyed notably strong growth in the year to 31 March 2012 which is continuing. The original buy and build strategy resumed during 2011, with the acquisition of Colchester-based Specialised Fasteners Products and of the larger Keighley-based Engineered Services (Fasteners) Limited. The acquisitions were funded with loans from RBS, which also refinanced existing bank debt, and have since been successfully integrated and both are trading well.
The Bunker Secure Hosting, which operates two ultra secure data centres, continues to win new orders, grow its annual revenues and generate substantial profits. For the year to 31 December 2010, an EBITDA of £1.5 million was achieved on sales of £6.2 million, at which date recurring annual revenues were running at £6.4 million. The company continues to grow strongly and recurring annual revenues now exceed £8 million. Further space has been fitted out in both data centres to meet growing customer demand and investment continues in upgrading infrastructure, funded by retained profits and additional bank facilities.
Trilogy Communications continues to make good progress with strong trading results being achieved in the year to 29 February 2012, particularly in the defence sector where a number of contract wins through partners such as Northrop Grumman and Raytheon were announced. Further growth is expected once large orders materialise from current equipment programmes later in 2012. A loan repayment of £23,285, together with a redemption premium of the same amount was received in July 2011 and a further loan repayment of £200,000 in December 2011 following completion of a £1.5 million growth capital round and partial refinancing.
Although Vertal enjoyed strong demand for its food waste recycling services, technical issues continued to hinder the rate of output as well as higher than expected disposal costs, resulting in substantial, continuing losses. Despite much progress, the process ultimately proved uneconomic and unsupportable, leading to administration. Operations were stable, with the end product being used as on-farm fertilizer as well as sold as a fuel for energy production in on-farm anaerobic digestion plants. The Mitcham, South London, recycling facility had steadily increased its volume of waste food inputs, operating at up to 900 tonnes per week, with a series of plant improvements, particularly relating to odour control and reducing water and energy consumption. The installation of a new shredder had successfully resolved the issue of plastic contamination and improved throughput, although this was still appreciably slower than projected. Following a detailed strategic review, no viable, supportable business model could be established and so Foresight Group declined to provide any future funding, resulting in the company going into administration on 21 June 2012. The Company's investment in Vertal (£1,300,133) has been written off in full as no recoveries are expected. In funding rounds in September 2011 and February 2012, the Ordinary Shares fund invested a total of £1,300,133 in the year under review.
The Company sold £48,000 of AiM listed Zoo Digital loan notes during the period. Simultaneously, Zoo successfully concluded an equity placing in August 2011 prior to the downturn in equity markets, to accelerate the roll-out of the company's software in new markets, particularly the creation of eBooks. The fundraising was contingent on the restructuring of Zoo Digital's loan notes, necessitating partial conversion of the company's loans (£483,750).Taking advantage of price weakness in the market, the opportunity was taken to buy further shares at a cost of £18,601.
New Investments
As part of a £2.1 million growth capital funding round, alongside existing shareholders and other Foresight VCTs, the Company invested £312,503 from the Ordinary Shares fund (and also £312,503 from the C Shares fund) in Wirral based Biofortuna Limited, a molecular diagnostics company with leading, proprietary expertise in cryo-preserving, enabling molecular reagents to be freeze-dried and stabilised, thereby substantially reducing distribution costs and transport losses while increasing the ease of use of such reagents.
Ordinary Share Fund Realisations
After some negotiation, the Ordinary Share fund received $881,296 of deferred consideration from Advanced Visual Technologies in October 2011, resulting from the partial release of funds held in escrow.
The Ordinary Shares fund received a loan repayment of £23,285 in July 2011 from Trilogy Communications plus a redemption premium of the same amount and a further £200,000 loan repayment in December 2011. As referred to above, the Company sold £48,000 of AIM listed Zoo Digital loan notes during the period.
As noted previously, £3.38m has been recognised from Autologic Diagnostics group and £713,423 from Datapath Group.
Outlook for the Ordinary Shares Fund
The underlying trading of many of the portfolio companies during the year under review has been stronger than was expected a year ago, benefiting, to varying degrees, from the positive export conditions created by a weaker currency and relatively stronger markets overseas. Conversely, although some investments in the environmental portfolio made progress, others experienced difficulties, with sales growth generally being constrained by the weak economic climate in the UK.
The economic conditions are expected to continue during 2012 and beyond but we remain reasonably optimistic about current prospects and the outlook, as for many portfolio companies, continue to display good order books and revenue and profit growth. Economic fundamentals and uncertainties could however lead to a prolonged period of low growth. Across the portfolio, we have, where appropriate, ensured that management are focused on cash conservation and cost reductions in light of the these conditions.
Foresight is actively pursuing both potential portfolio realisations in several market sectors to generate value and also pursuing new investment opportunities with appropriate caution.
C Shares Fund Portfolio Review
On 6 February 2012, Acuity Growth VCT and Acuity VCT 3 (which had substantially common portfolios) were merged into a new separate C Shares fund within the Company with an opening NAV of £1 per share. The C Shares fund will be managed separately to the existing Ordinary Shares fund for approximately three years, at which point it is anticipated that the C Shares fund will be merged with the Ordinary Shares fund on a relative net asset value basis using the audited net asset values of each fund as at 31 March 2015.
The NAV decreased 5.6% to 94.4p as at 31 March 2012 reflecting valuation decreases in The Fin Machine (£592,973), Connect2 Media (£430,570) and Defaqto (£190,123).
Pre the merger, after a competitive exit process, the sale of Factory Media to Forward Internet Group completed on 31 January 2012, generating c. £4 million for each of Foresight 5 VCT and Acuity VCT 3, subject to working capital adjustments. Approximately £1 million remains in escrow against warranty and tax claims for the next two years. This equates to a return of 2.5 times the original cost of investment. Forward Internet Group is a private UK business, which operates a portfolio of various web brands, including price comparison site uSwitch, and other digital media assets. Factory Media, formed in 2006, is Europe's largest action sports media owner, publishing 19 magazines (sold through newsstands, subscriptions and mobile devices such as the iPhone and iPad) and 25 websites via its network, MPORA. Its titles cover all major cycling sectors, as well as major board sports, skiing and motocross markets. Profitability has grown significantly since 2006, driven by growth of high-margin digital revenues.
Also, pre merger, following a thorough sale process, Financial News Publishing was sold in January 2012 to an associate of Progressive Digital Media plc, World Market Intelligence Limited with Foresight 5 receiving proceeds of £0.6 million. The company publishes monthly subscription based newsletters and provides data, intelligence and analysis for more than 1,300 customers in the global financial services market and organises events under the brand name VRL. For the year to 30 June 2011, a small EBITDA of £33,000 was achieved on revenues of £3.6 million.
The investment in PFS Downing Active Management (a specialist investment fund with a concentrated portfolio of UK smaller companies with market capitalisations between £20 million and £150 million) was sold in February 2012 for £205,163.
Since the date of the merger one follow-on investment was made totalling £1.6 million into The Fin Machine.
No share buy backs have been made since the merger. Three new investments have been made since the merger in February, namely Biofortuna (£312,503) and two energy efficiency companies, Leisure Efficiency II (£675,150) and Wholesale Efficiency II (£1,000,000).
Further details on each of the companies in the investment portfolio are set out below.
Connect2 Holdings, which trades as Connect2 Media, is a developer, publisher and distributor of digital media entertainment on a range of devices including mobile phones, portable games consoles, Blackberrys, Android, Windows Mobile, iPhones, PCs and interactive TVs. The company is headquartered in Manchester and has offices in Europe, Middle East, Asia and the Americas.
Against a challenging economic backdrop, management is in the process of repositioning the company's business model away from the declining feature phone market towards the rapidly growing but competitive smartphone market. Traditionally, the vast majority of the company's revenues have been derived from sales of 'Premium' gaming content i.e. 'pay-per-download' on feature phones. However, the rapid growth of smartphones over the last 18 months and the advent of 'Freemium' gaming content (i.e. free to play with paid for upgrades) has significantly reduced the company's core market.
For the year ended 31 December 2011, an EBITDA loss of £158,000 was incurred on sales of £3.58 million. Despite cost reductions, losses continued in the first three months of the current financial year ending 31 December 2012. In March 2012, a new CEO was recruited whose experience includes founding and ultimately exiting two US software companies and migrating from a B2B business model to a cross platform B2C business model.
In line with the new strategy, development of Rail Road Inc, the company's first direct to consumer Freemium title, is on track and the beta version of the title is scheduled to be published in July 2012. Concepts for future Freemium titles are now being considered, some of which will be produced in house and others licensed in.
For the year to 31 March 2011, Defaqto incurred a small EBITDA loss on sales of £8.5 million, reflecting continuing heavy investment in new product development. After several years of development, the company released its new Matrix product for financial product providers during Summer 2011. Matrix provides a platform for upgrades to the other products, which should come to market more rapidly, including a replacement for Engage which is targeted at the IFA sector. Having traded largely on budget for most of the year to 31 March 2012, Defaqto experienced increasingly difficult trading in the final quarter, resulting in the sales budget being missed and increased EBITDA losses.
The Fin Machine ('Fin') designs, manufactures and distributes special purpose capital equipment that is used to manufacture heat exchangers for the automotive and air conditioning markets. Fin's global customer base includes a broad range of blue chip OEMs, automotive industry majors and Asian air conditioning companies. Fin has manufacturing facilities in Seaham, Co. Durham and in Tianjin, China, as well as an assembly/service centre in Indiana, USA.
In order to stem continuing losses, turn the company round and deliver on a large order book, Keith Jordan was appointed as Executive Chairman in late 2010 and began to strengthen the management team by recruiting an experienced new CEO, CFO and General Manager for China. For the year to 31 December 2011, the company incurred an EBITDA loss of £2.4 million on revenues of £16.4 million, but continued to enjoy strong order intake. To meet this continuing large order book and fund working capital, Foresight 5 and Acuity VCT 3 advanced loans totalling £500,000 in October 2011, alongside more than £500,000 of additional credit lines from Clydesdale, the company's bank. The new management team developed a comprehensive plan to restructure the business, improve profitability and working capital dynamics during 2012. A complex capital reorganisation was successfully concluded in
late 2011.
The turnaround continues to make reasonable progress but still has some way to go. For the quarter to 31 March 2012, the company broke even at the EBITDA level on sales of £7.6 million, delivering 18 machines which were delayed from Q4 2011 under a number of contracts. The delayed machines incurred significant additional costs, reducing overall gross margins. Improving gross margins and manufacturing efficiency are key to the turnaround succeeding. In February 2012, the C Share Fund advanced further loans totalling £1.6 million to meet working capital requirements and reduce a significant creditor balance. Clydesdale are expected to extend their working capital and term loan facilities to September 2012. Cash continues to remain tight and further funds will be required during Summer 2012 to finance a planned reorganisation and cost reduction programme.
In March 2012, the CEO was removed, with the long serving, experienced Sales Director taking the role of UK General Manager and Keith Jordan continuing as Executive Chairman. A recruitment process has commenced to fill five roles in the senior team immediately below board level. With a large current and overdue order book, a small EBITDA is projected on sales of some £30 million for the current year to 31 December 2012.
Guildford based Hallmarq VeterinaryImaging is the only manufacturer of MRI systems for the standing equine market, with over 50 MRI scanners in use at equine practices throughout the World. One of the major benefits of their system is that the horse is only lightly sedated, which is particularly advantageous as horses respond poorly to general anaesthetic with fatalities in 0.5% of cases. For the year ended 31 August 2011, the company achieved an EBITDA of £664,000 on sales of £2.69 million, slightly ahead of budget. Trading in the current financial year to 31 August 2012 is particularly strong (including unbudgeted outright system sales), well ahead of budget and the corresponding period in the previous year.
In October 2011, the company successfully completed a £1.14 million fund raising of new ordinary shares and new Convertible Loan Stock in which Foresight 5 did not participate. These funds were raised to support development of an MRI scanner for the Companion Animal market (i.e. cats and dogs) planned to be launched in Summer 2012 and to repay £280,000 of loans to Foresight 5 in September 2011. A further £746,000 term loan is due for repayment on 31 August 2012.
New Investments by the C Shares Fund
Three new investments have been made since the merger in February, in Biofortuna and two energy efficiency companies, Leisure Efficiency II and Wholesale Efficiency II.
As part of a £2.1 million growth capital funding round, alongside existing shareholders and other Foresight VCTs, the Company invested £312,503 from the C Shares fund (and also £312,503 from the Ordinary Shares fund) in Wirral based Biofortuna Limited, a molecular diagnostics company with leading, proprietary expertise in cryo-preserving, enabling molecular reagents to be freeze-dried and stabilised, thereby substantially reducing distribution costs and transport losses while increasing the ease of use of such reagents.
Leisure Efficiency II (£675,150) and Wholesale Efficiency II (£1,000,000) have recently been set up in anticipation of two impending energy efficiency transactions with an identified leisure company and a wholesaling company.
Outlook for the C Shares Fund
The C Shares portfolio comprises four legacy investments with a positive value, each of which is considered to have the potential to create value for shareholders in excess of its present carrying value, and three new investments. Of the legacy investments, Hallmarq continues to trade well and is expected to repay its loans and create further shareholder value over time. Following the appointment of a new CEO at Connect2 Media and the current corrective action being taken at Defaqto, both companys' trading is expected to improve over the medium term, thereby enabling an exit strategy to be pursued at the appropriate time. The potential main key value driver for the C Shares fund continues to be achieving a turnaround of Fin Machine, followed by a successful trade sale. While many risks remain and the management team still has much to do before the turnaround is complete, the company continues to make progress.
In each case, Foresight is actively considering how to optimise and realise shareholder value.
With cash balances of over £6 million, Foresight are actively seeking suitable investment opportunities for the C Shares fund in order to generate income and capital appreciation, and broaden the portfolio while diversifying risk. The fund will typically invest alongside other Foresight funds in suitable companies, as is the case with Biofortuna.
David Hughes
Foresight Group
Chief Investment Officer
31 July 2012
The Disclosure and Transparency Rules ("DTR") of the UK Listing Authority require certain disclosures in relation to the annual financial report, as follows:
Principal risks, risk management and regulatoryenvironment
The Board believes that the principal risks faced by the Company are:
Economic risk - events such as an economic recession and movement in interest rates could affect smaller companies' performance and valuations.
Loss of approval as a Venture Capital Trust - the Company must comply with Section 274 of the Income Tax Act 2007 which allows it to be exempted from capital gains tax on investment gains. Any breach of these rules may lead to: the Company losing its approval as a VCT; qualifying shareholders who have not held their shares for the designated holding period having to repay the income tax relief they obtained; and future dividends paid by the Company becoming subject to tax. The Company would also lose its exemption from corporation tax on capital gains.
Investment and strategic - inappropriate strategy, poor asset allocation or consistent weak stock selection might lead to under performance and poor returns to shareholders.
Regulatory - the Company is required to comply with the Companies Act 2006, the rules of the UK Listing Authority and United Kingdom Accounting Standards. Breach of any of these might lead to suspension of the Company's Stock Exchange listing, financial penalties or a qualified audit report.
Reputational - inadequate or failed controls might result in breaches of regulations or loss of shareholder trust.
Operational - failure of the Manager's or Company Secretary's accounting systems or disruption to its business might lead to an inability to provide accurate reporting and monitoring.
Financial - inadequate controls might lead to misappropriation of assets. Inappropriate accounting policies might lead to misreporting or breaches of regulations. Additional financial risks, including interest rate, credit, market price and currency, are detailed in note 15 to the Annual Report and Accounts. .
Market risk - investment in AIM traded, PLUS traded and unquoted companies by its nature involves a higher degree of risk than investment in companies traded on the main market. In particular, smaller companies often have limited product lines, markets or financial resources and may be dependent for their management on a smaller number of key individuals. In addition, the market for stock in smaller companies is often less liquid than that for stock in larger companies, bringing with it potential difficulties in acquiring, valuing and disposing of such stock.
Liquidity risk - the Company's investments, both unquoted and quoted, may be difficult to realise. Furthermore, the fact that a share is traded on AIM or PLUS Markets does not guarantee its liquidity. The spread between the buying and selling price of such shares may be wide and thus the price used for valuation may not be achievable.
The Board seeks to mitigate the internal risks by setting policy, regular review of performance, enforcement of contractual obligations and monitoring progress and compliance. In the mitigation and management of these risks, the Board applies the principles detailed in the UK Corporate Governance Code. Details of the Company's internal controls are contained in the Corporate Governance and Internal Control sections of the Annual Report and Accounts.
Statement of Directors' Responsibilities
The Directors are responsible for preparing the Directors' Report and the financial statements, in accordance with applicable United Kingdom law and United Kingdom Generally Accepted Accounting Practice.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.
In preparing these financial statements, the Directors are required to:
select suitable accounting policies and then apply them consistently;
make judgements and estimates that are reasonable and prudent; and
state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements.
The Directors are responsible for keeping adequate accounting records that disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that its financial statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities.
Under applicable law and regulations, the Directors are also responsible for preparing a Directors' Report (including Business Review), Directors' Remuneration Report and Corporate Governance Statement that comply with that law and those regulations.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website, www.foresightgroup.eu. Visitors to the website should be aware that legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
We confirm that to the best of our knowledge:
the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and
the Directors' Report includes a fair review of the development and performance of the business and the position of the Company together with a description of the principal risks and uncertainties that it faces.
On behalf of the Board
Philip Stephens
Chairman
31 July 2012
Unaudited Non-Statutory Analysis between the Ordinary Shares and C Shares Funds
| Income Statements | ||||||||||
| for the year ended 31 March 2012 | ||||||||||
| Ordinary Shares Fund | C Shares Fund | |||||||||
| Revenue | Capital | Total | Revenue | Capital | Total | |||||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |||||
| Investment holding losses | - | (7,353) | (7,353) | - | (1,535) | (1,535) | ||||
| Realised gains on investments | - | 5,086 | 5,086 | - | 531 | 531 | ||||
| Income | 222 | - | 222 | - | - | - | ||||
| Investment management fees | (211) | (917) | (1,128) | - | - | - | ||||
| Other expenses | (376) | - | (376) | (60) | - | (60) | ||||
| Loss on ordinary activities before taxation | (365) | (3,184) | (3,549) | (60) | (1,004) | (1,064) | ||||
| Taxation | - | - | - | - | - | - | ||||
| Loss on ordinary activities after taxation | (365) | (3,184) | (3,549) | (60) | (1,004) | (1,064) | ||||
| Return per share | (1.0)p | (8.7)p | (9.7)p | (2.1)p | (35.7)p | (37.8)p | ||||
| Balance Sheets | |||||||
| at 31 March 2012 | |||||||
| Ordinary Shares Fund | C Shares Fund | ||||||
| £'000 | £'000 | ||||||
| Fixed Assets | |||||||
| Investments held at fair value through profit or loss | 31,206 | 11,877 | |||||
| Current assets | |||||||
| Debtors | 3,221 | 647 | |||||
| Money market securities and other deposits | 1,539 | - | |||||
| Cash | 1,656 | 6,118 | |||||
| 6,416 | 6,765 | ||||||
| Creditors: Amounts falling due within one year | (1,055) | (987) | |||||
| Net current assets | 5,361 | 5,778 | |||||
| Net assets | 36,567 | 17,655 | |||||
| Capital and reserves | |||||||
| Called-up share capital | 378 | 187 | |||||
| Share premium account | 1,417 | 18,532 | |||||
| Capital redemption reserve | 1,851 | - | |||||
| Profit and loss account | 32,921 | (1,064) | |||||
| Equity shareholders' funds | 36,567 | 17,655 | |||||
| Number of shares in issue | 37,756,345 | 18,693,098 | |||||
| Net asset value per share | 96.9p | 94.4p |
At 31 March 2012 there was an inter-share debtor/creditor of £343,000 which has been eliminated on aggregation.
Reconciliations of Movements in Shareholders' Funds
for the year ended 31 March 2012
| Called-up share capital | Share premium account | Capital redemption reserve | Profit and loss account | Total | |
| £'000 | £'000 | £'000 | £'000 | £'000 | |
| Ordinary Shares | |||||
| Book cost as at 1 April 2011 | 359 | 25,137 | 1,844 | 12,823 | 40,163 |
| Share issues in the year | 26 | 2,829 | - | - | 2,855 |
| Expenses in relation to share issues | - | (290) | - | - | (290) |
| Repurchase of shares | (7) | - | 7 | (711) | (711) |
| Cancellation of share premium | - | (26,259) | - | 26,259 | - |
| Dividends | - | - | - | (1,901) | (1,901) |
| Loss for the year | - | - | - | (3,549) | (3,549) |
| As at 31 March 2012 | 378 | 1,417 | 1,851 | 32,921 | 36,567 |
| Called-up share capital | Share premium account | Capital redemption reserve | Profit and loss account | Total | |
| £'000 | £'000 | £'000 | £'000 | £'000 | |
| C Shares | |||||
| As at 1 April 2011 | - | - | - | - | - |
| Share issues in the year | 187 | 18,516 | - | - | 18,703 |
| Expenses in relation to share issues | - | 16 | - | - | 16 |
| Loss for the year | - | - | - | (1,064) | (1,064) |
| As at 31 March 2012 | 187 | 18,532 | - | (1,064) | 17,655 |
Audited Income Statement
for the year ended 31 March 2012
| Year ended | 13 months ended | ||||||
| 31 March 2012 | 31 March 2011 | ||||||
| Revenue | Capital | Total | Revenue | Capital | Total | ||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||
| Investment holding (losses)/gains | - | (8,888) | (8,888) | - | 6,637 | 6,637 | |
| Realised gains on investments | - | 5,617 | 5,617 | - | 30 | 30 | |
| Income | 222 | - | 222 | 1,025 | - | 1,025 | |
| Investment management fees | (211) | (917) | (1,128) | (259) | (1,036) | (1.295) | |
| Other expenses | (436) | - | (436) | (358) | - | (358) | |
| (Loss)/return on ordinary activities before taxation | (425) | (4,188) | (4,613) | 408 | 5,631 | 6,039 | |
| Taxation | - | - | - | (93) | 93 | - | |
| (Loss)/return on ordinary activities after taxation | (425) | (4,188) | (4,613) | 315 | 5,724 | 6,039 | |
| Return per share: | |||||||
| Ordinary Share | (1.0)p | (8.7)p | (9.7)p | 1.0p | 17.8p | 18.8p | |
| C Share | (0.3)p | (5.4)p | (5.7)p | n/a | n/a | n/a | |
The total column of this statement is the profit and loss account of the Company and the revenue and capital columns represent supplementary information.
All revenue and capital items in the above Income Statement are derived from continuing operations. No operations were acquired or discontinued in the year.
The Company has no recognised gains or losses other than those shown above, therefore no separate statement of total recognised gains and losses has been presented.
Audited Reconciliation of Movements in Shareholders' Funds
| Company | Called-up share capital | Share premium account | Capital redemption reserve | Profit and loss account | Total |
| 13 month period ended 31 March 2011 | £'000 | £'000 | £'000 | £'000 | £'000 |
| As at 1 March 2010 | 270 | 15,425 | 1,837 | 9,181 | 26,713 |
| Share issues in the period | 96 | 10,056 | - | - | 10,152 |
| Expenses in relation to share issues | - | (344) | - | - | (344) |
| Repurchase of shares | (7) | - | 7 | (669) | (669) |
| Return for the period | - | - | - | 6,039 | 6,039 |
| Dividend | - | - | - | (1,728) | (1,728) |
| As at 31 March 2011 | 359 | 25,137 | 1,844 | 12,823 | 40,163 |
| Company | Called-up share capital | Share premium account | Capital redemption reserve | Profit and loss account | Total |
| Year ended 31 March 2012 | £'000 | £'000 | £'000 | £'000 | £'000 |
| As at 1 April 2011 | 359 | 25,137 | 1,844 | 12,823 | 40,163 |
| Share issues in the year | 213 | 21,345 | - | - | 21,558 |
| Expenses in relation to share issues | - | (274) | - | - | (274) |
| Repurchase of shares | (7) | - | 7 | (711) | (711) |
| Cancellation of share premium | - | (26,259) | - | 26,259 | - |
| Dividends | - | - | - | (1,901) | (1,901) |
| Loss for the year | - | - | - | (4,613) | (4,613) |
| As at 31 March 2012 | 565 | 19,949 | 1,851 | 31,857 | 54,222 |
Audited Balance Sheet
at 31 March 2012
| Registered Number: 03506579 | |||||
| As at | As at | ||||
| 31 March 2012 | 31 March 2011 | ||||
| £'000 | £'000 | ||||
| Fixed assets | |||||
| Investments held at fair value through profit or loss | 43,083 | 32,306 | |||
| Current assets | |||||
| Debtors | 3,525 | 2,502 | |||
| Money market securities and other deposits | 1,539 | 3,368 | |||
| Cash | 7,774 | 3,401 | |||
| 12,838 | 9,271 | ||||
| Creditors | |||||
| Amounts falling due within one year | (1,699) | (1,414) | |||
| Net current assets | 11,139 | 7,857 | |||
| Net assets | 54,222 | 40,163 | |||
| Capital and reserves | |||||
| Called-up share capital | 565 | 359 | |||
| Share premium account | 19,949 | 25,137 | |||
| Capital redemption reserve | 1,851 | 1,844 | |||
| Profit and loss account | 31,857 | 12,823 | |||
| Equity shareholders' funds | 54,222 | 40,163 | |||
| Net asset value per share: | |||||
| Ordinary Share | 96.9p | 112.0p | |||
| C Share | 94.4p | - | |||
Audited Cash Flow Statement
for the year ended 31 March 2012
| Year ended | 13 months ended | |
| 31 March 2012 | 31 March 2011 | |
| £'000 | £'000 | |
| Cash flow from operating activities | ||
| Investment income received | 245 | 354 |
| Deposit and similar interest received | 23 | 39 |
| Investment management fees paid | (1,217) | (1,326) |
| Secretarial fees paid | (82) | (119) |
| Other cash payments | (394) | (293) |
| Net cash outflow from operating activities and returns on investment | (1,425) | (1,345) |
| Taxation | - | - |
| Investing activities | ||
| Purchase of unquoted investments and investments quoted on AIM | (9,158) | (4,290) |
| Net proceeds on sale of unquoted investments | 4,589 | 826 |
| Net proceeds on deferred consideration | 592 | 148 |
| Net capital outflow from investing activities | (3,977) | (3,316) |
| Equity dividends paid | (1,901) | (1,728) |
| Net cash outflow before financing and liquid resource management | (7,303) | (6,389) |
| Management of liquid resources | ||
| Movement in money market funds | 1,829 | (1,428) |
| 1,829 | (1,428) | |
| Financing | ||
| Proceeds of fund-raising | 179 | 10,040 |
| Acquisition issue shares | 10,956 | - |
| Expenses of fund-raising | (155) | (145) |
| Repurchase of own shares | (1,133) | (728) |
| Net cash inflow from financing activities | 9,847 | 9,167 |
| Increase in cash | 4,373 | 1,350 |
| Reconciliation of net cash flow to movement in net funds | ||
| Increase in cash for the year | 4,373 | 1,350 |
| Net cash at start of year | 3,401 | 2,051 |
| Net cash at end of year | 7,774 | 3,401 |
| Analysis of changes in net debt | |||||
| At 1 April 2011 | Cash flow | At 31 March 2012 | |||
| £'000 | £'000 | £'000 | |||
| Cash and cash equivalents | 3,401 | 4,373 | 7,774 | ||
Notes to the accounts
1. The audited Annual Financial Report has been prepared on the basis of accounting policies set out in the statutory accounts of the Company for the year ended 31 March 2012. All investments held by the Company are classified as 'fair value through the profit and loss'. Unquoted investments have been valued in accordance with IPEVC guidelines. Quoted investments are stated at bid prices in accordance with the IPEVC guidelines and Generally Accepted Accounting Practice.
2. These are not statutory accounts in accordance with S436 of the Companies Act 2006. The full audited accounts for the year ended 31 March 2012, which were unqualified and did not contain and statements under S498(2) of Companies Act 2006 or S498(3) of Companies Act 2006, will be lodged with the Registrar of Companies. Statutory accounts for the year ended 31 March 2012 including an unqualified audit report and containing no statements under the Companies Act 2006 will be delivered to the Registrar of Companies in due course.
3. Copies of the Annual Report will be sent to shareholders and will be available for inspection at the Registered Office of the Company at ECA Court, 24-26 South Park, Sevenoaks, Kent TN13 1DU and can be accessed on the following website: www.foresightgroup.eu
4. Net asset value per share
Net asset value per Ordinary Share is based on net assets at the year end of £36,567,000 (2011: £40,163,000) and on 37,756,345 (2011: 35,864,981) Ordinary Shares, being the number of Ordinary Shares in issue at that date.
Net asset value per C Share is based on net assets at the year end of £17,655,000 (2011: n/a) and on 18,693,098 C Shares, being the number of C Shares in issue at that date.
5. Return per share
| Year ended 31 March 2012 | 13 months ended 31 March 2011 | |||
| Ordinary Shares | C Shares | Ordinary Shares | C Shares | |
| £'000 | £'000 | £'000 | £'000 | |
| Total (loss)/return after taxation | (3,549) | (1,064) | 6,039 | n/a |
| Total (loss)/return per share (note a) | (9.7)p | (5.7)p | 18.8p | n/a |
| Revenue (loss)/return from ordinary activities after taxation | (365) | (60) | 315 | n/a |
| Revenue (loss)/return per share (note b) | (1.0)p | (0.3)p | 1.0p | n/a |
| Capital (loss)/return from ordinary activities after taxation | (3,184) | (1,004) | 5,724 | n/a |
| Capital (loss)/return per share (note c) | (8.7)p | (5.4)p | 17.8p | n/a |
| Weighted average number of shares in issue in the period | 36,604,335 | 18,693,098 | 32,204,092 | n/a |
Notes:
a) Total return per share is total return after taxation divided by the weighted average number of shares in issue during the period.
b) Revenue return per share is revenue return after taxation divided by the weighted average number of shares in issue during the period.
c) Capital return per share is capital return after taxation divided by the weighted average number of shares in issue during the period.
6. The Annual General Meeting will be held at 12.00pm on 27 September 2012 at the offices of SGH Martineau LLP, One America Square, Crosswall, London EC3N 2SG.
7. Income
| Year ended 31 March | 13 months ended 31 March | ||
| 2012 | 2011 | ||
| £'000 | £'000 | ||
| Loan stock interest | 199 | 985 | |
| Overseas based Open Ended Investment Companies ("OEICS") | 21 | 28 | |
| Bank deposits | 2 | 12 | |
| 222 | 1,025 | ||
8. Investments held at fair value through profit or loss
| 2012 | 2011 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| £'000 | £'000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Quoted investments | 1,087 | 1,812 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Unquoted investments | 41,996 | 30,494 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 43,083 | 32,306 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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9. Related party transactions
Foresight Group LLP, Foresight Fund Managers Limited and Foresight Group CI Limited are considered to be Related Parties of the Company. Details of arrangements with these parties are given in the Directors' Report and note 3 within the Annual Report and Accounts.
Foresight Group, which acts as investment manager to the Company in respect of its venture capital investments earned fees of £1,128,000 during the year (2011: £1,295,000), including carried interest of £285,000 (2011: £259,000).
Foresight Fund Managers Limited is the Secretary of the Company and received fees of £116,731 (2011: £86,294) during the year. The annual secretarial fee (which is payable together with any applicable VAT) is adjusted annually in line with the UK Retail Prices Index.
At the balance sheet date there was £110,000 (2011: £nil) due to Foresight Group and £35,000 (2011: £nil) due to Foresight Fund Managers Limited. No amounts have been written off in the year in respect of debts due to or from the related parties.
Foresight Group are responsible for external costs such as legal and accounting fees, incurred on transactions that do not proceed to completion ('abort expenses'). In line with common practice, Foresight Group retain the right to charge arrangement and syndication fees and Directors' or monitoring fees ('deal fees') to companies in which the Company invests.
Foresight Group is also a part to the performance incentive agreement described in note 13 within the Annual Report and Accounts.
END
The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and other applicable laws; and
(ii) they are solely responsible for the content, accuracy and originality of the
information contained therein.
Source: Foresight 4 VCT PLC via Thomson Reuters ONE
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